According to the data released by RealtyTrac, the leading online marketplace of foreclosure properties, foreclosure filings in the third quarter of 2011 increased slightly from the prior quarter, with 610,337 properties receiving notices of default, auction or repossession during the reported quarter. However, this is still down 34% from the prior-year quarter figures.

The modest rise in foreclosure activity during June-September quarter is the first increase after three consecutive quarterly declines.

Though there was surge in new defaults, the number of property auctions and repossessions by banks continued to decline during the third quarter. Issuance of default notice, the first step in the foreclosure process, upped 14% sequentially but dropped 27% year over year to 195,878.

However, foreclosure auctions fell 6% from the prior quarter and plunged 41% from the prior-year quarter to 217,929 properties. Similarly, rate of bank repossessions, the final stage, slipped 4% from the previous quarter and 32% from the year-ago period to 196,530 properties.

As per the report, the average time taken to complete a foreclosure process was 336 days in the third quarter, up from 318 days in the second quarter. Further, properties in midst of the foreclosure process took an average of 318 days to get sold in the quarter under review. This is also significantly higher than 245 days taken in the prior quarter.

Also, bank-owned properties sold in the third quarter took an average of 193 days to get sold after being repossessed by the bank, up from 178 days in the second quarter.

Furthermore, according to the report, mortgage servicers are expected to repossess about 800,000 homes this year.

The increase in overall foreclosure activity indicates that the banks and mortgage servicers have stepped up their resources and started taking action against defaulting homeowners. This also goes on to show that the mortgage servicers are now trying to remove the backlog of properties in foreclosure.

This comes almost a year after the banks and mortgage servicers, including JPMorgan Chase & Co. (JPM), Bank of America Corporation (BAC) and Ally Financial Inc. had temporarily suspended foreclosures across the country.

The prime reasons behind the halt and decline in foreclosure activity were flawed paperwork, delays due to process held up in courts, re-filing of earlier filed foreclosure cases, enquiries by regulatory agencies and reluctance of lenders to take back properties resulting from declining home sales.

Further, a combination of various measures – loan modifications, lender-borrower mediation and mortgage payment assistance for the unemployed – were also taken up by national and state-level regulators to allow distressed home owners to prevent foreclosures.

However, with many of the problems getting resolved or on verge of resolution, the temporary down trend in foreclosures is about to reverse. The increase in foreclosure activity also shows that the U.S. housing market is on the threshold of a turnaround but it will not be as fast as required. Hence, we should now prepare ourselves for an exceptional rise in foreclosure activities over the next few quarters.